Canadian Economic Action Plan

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QUESTION ONE:

The Canadian Action Plan sets out five approaches towards stimulating economic growth restore public confidence and support Canadians and their families during the hard period of global recession. The elements of the plan as presented by Jim Flaherty the minister of finance are; Helping Canadians and Stimulate Spending, stimulating housing, infrastructure building and development, business support not forgetting communities and lastly access to financial services and strengthening Canada’s financial systems (CEAP, 2009).

Those disadvantaged and the worst hit by the economic meltdown will be helped by reducing the amount of taxes they pay and also through enhancement of their employment insurance. Unemployed and the old will also receive some benefits. Opportunities targeting the youth and training to ensure that they are relevant will be developed. Through such benefits individuals will have higher disposable incomes and consequently will spend more. The government set aside $13.5 billion to be used over a three year period. The youth form the largest percentage of most economies which may not be overlooked. They are energetic and have the potential to take any economy into greater heights. The youth are more creative and flexible hence can match the ever changing economic situations.

Canadian government allocated $7.8 billion to support home ownership through house construction and renovation of existing houses. Through home renovation tax credit, legible individuals can renovate their houses. The government also intends to reduce cost of housing related loans to enable Canadians to afford loans for house construction. It also intends to provide direct finances to the disabled to construct houses. Housing is a basic need and so no government can talk of alleviating poverty without proper housing for her people. Canadian government highlighted this as one of the main sectors to address as a strategy to contributing to economic growth.

Development of infrastructure will involve improvement of the already existing ones and at the same time building new and modern infrastructure. Major infrastructural projects such as the Telus World of Science will be completed. To this effect the government pumped $12 billion into infrastructure project. It’s through infrastructure that Canadian economy would be opened up for rural communities to access urban market where they can fetch better prices for their products. Also local products will access international markets through an improved air transport. Opening the economy is a desirable pre requisite to economic growth as opposed to a closed economy where by a country locks itself out of the international world (Patel, 2001).

Private sector is quite key in every economy. Canada did not forget the private sector. It came and injected $7.5billion with an aim to protect jobs and at the same time motivate those in the sector to invest more. Job creation is one challenge facing Canada and if minimized then it would be a great achievement. The government reduced tariffs on imported machinery and equipment. Investment on computers was also reduced. These efforts were meant to motivate the private investors to a growing private sector. Though corporate taxes form a good portion of the government revenue they can at the same discourage investment and this would impact negatively on the job creation element of the budget.

Lastly, the government was working on streamlining financial services. The commitment was seen by the large portion of the budget going to the financial sector. A total of $200 billion went to the sector with $50 billion going to Canadian financial institutions. The business development bank of Canada was expanded. More businesses can access financial services. It’s through access to financial that small and medium businesses will expand, create more job opportunities and through the linkage effects result to a growing economy.

QUESTION TWO

Any government needs to spend especially on the public goods. Government spending is an important stimulant for economic growth. Any positive efforts by the Canadian government to stimulate the Canadian economic growth must involve a lot of government spending. The government spends on real goods and services hence injecting a lot of money in the economy. The increased money in the economy results to low cost of money in the form of interest rates due to increased money supply. Individuals and small businesses can access money for expanding their existing business and also investing in new business(O'Manique,1999). The end result is job opportunities through linkage and multiplier effects. Such a big spending is only possible with a gross domestic product. National product is the gross domestic product in addition to any external earnings. Both the incomes extend the government power to spend. The main source of Gross domestic product is the income taxes. Through expanded gross domestic product the government will improve on roads and construct new ones. Other services the government will provide include health services and water services (Matthews,1995). All these public products will transform Canada into an efficient economy hence a more competitive one.

Corporate taxes contribute to government earning. These are taxes charged on corporate organizations for instance multinational businesses. Apart from adding to government income the government in-turn can use these taxes can be used to encourage investment. Reduction in corporate taxes will mean high net profits to the businesses affected. As a result, more multinational organizations will be encouraged to invest in Canada. As a result more job opportunities will be created for the youth. Reduced jobless situations are desired in the growth of any economy. The consequence would be high national output and more national income hence a more competitive nation as it trades with the world markets for foreign exchange(Lyon,1976).

Government spending is an effective immediate stimulant to economic growth especially in times of economic meltdown. Government money decreases the cost of money in-terms of interest rates. Individuals and small businesses can afford money for business investment and expansion of existing businesses. Spending will be in-form of infrastructure improvement among other public goods and services. With better roads, water and health care then the population becomes more productive and consequently relatively advantaged.

Infrastructure takes diverse form. The main ones are roads, electricity. Infrastructure improves on productivity in-terms of time and place utility. Transport network ensures that commodities are in the right place where they fetch the best prices at the right time when those prices are best. Health care facilities ensure an energetic population hence increased productivity. Reduced spoilage of products, meeting world demands would make Canada more competitive than those countries without such facilities.

Job creation is way of reducing human suffering. As people earn good salaries from their jobs they tend to spend more of that money. Increased spending will translate into more government revenue and as a result the government will be able to meet its spending on public goods. All these factors work in complex way, reinforcing and complementing each other hence they make a great impact when looked at holistically.

QUESTION THREE

Canada has had a socialism history (Milne J. M, 1973). According to Milne, socialism started in Canada in the 1890’s with the socialist labour party. In 1898 the Canadian Socialist League came into being. In 1901, the Socialist party was born in the British Columbia. Socialist Party of Manitoba came into existence in the year 1902. Lastly Socialist Party of Ontario was born on the year 1903. All these parties insisted in communal ownership of production, distribution and proportional representation. Change is not a very easy thing. The Canadian Action plan seemed to follow a socialism approach in the sense that most the national revenues were distributed in a way to ensure all Canadians were equal. In the allocation the government concentrated more on uplifting the worst hit by the economic meltdown not forgetting the resource poor, the disabled, small businesses which are more vulnerable to financial stress and seem to be socially disadvantaged in competing for national opportunities (Charlton, 1984).

The government announced to reduce income taxes which translate into the lower earning category of the society hiving high disposable income. With an aim to improve the housing sector especially for the resource challenged, the government also allocated $ 7.5 billion. The targeted are the disabled who do not experience a flat playing ground as the rest of the society (Nossal,1994).

The implication is that the government is trying to develop a system whereby all the citizens have an equal share of the national cake by targeting those sectors which aim or influence the resource poor. Such sectors impacting to the poor include infrastructure like roads, housing in which most of the poor are the ones who cannot afford decent houses as opposed to their counterparts (the rich) who can comfortably buy or construct houses. The government also injected a lot of money into the financial sector especially in financing small and medium enterprises. The government injected $200 billion with $50 going direct to small financial institutions (Pratt, 2002).

All these are efforts to ensuring an equal society in the sense of resource allocation, resource access and the trickledown effect of such policies. Though socialism is a difficult concept especially with changing economies towards personalization of economies, it is a good effort especially in governance to ensuring an equal chance of all the citizens of Canada.